For construction businesses, payroll is far more complex than ensuring employees receive their paychecks on time. Between managing prevailing wage requirements, tracking labor costs across multiple job sites, maintaining compliance with state and federal regulations, and ensuring accurate certified payroll and union reporting, contractors have unique payroll challenges that most other industries don’t.

Yet many contractors continue to use generic payroll solutions that weren’t designed to address the nuances of construction payroll. Using a solution that can’t keep up with the demands of the industry not only causes unnecessary frustration but can also seriously hinder efficiency and hurt your bottom line. 

Let's explore the top five reasons why generic payroll solutions fall short for contractors — and what you should look for instead. 

Reason #1: Generic Payroll Systems Can't Handle Construction Compliance

Construction payroll compliance is notoriously complex, with requirements varying based on project type, funding source, and location. You must ensure compliance with the Davis-Bacon Act, Fair Labor Standards Act, state labor laws, prevailing wage laws, and a host of other regulations. It’s a lot to keep track of, especially when you’re managing multiple projects in multiple states. 

Generic payroll systems are designed for less complicated business environments and do not have construction compliance features built into the solution. This forces you to manage compliance manually or through cumbersome workarounds, which puts your business at risk for compliance failures.

The consequences of not complying can quickly erode business profits as you could face potential back pay awards, penalties, legal fees, and even disqualification from future government contracts if you fail to meet wage and hour requirements.

In contrast, construction-specific payroll solutions build compliance tools directly into your workflows, reducing the administrative burden on payroll staff and ensuring accuracy. A construction payroll solution gives you peace of mind, automatically calculating prevailing wage rates, generating required government reports, tracking union benefit contributions, and maintaining comprehensive documentation for potential audits. 

Reason #2: Generic Payroll Solutions Lack Job Costing Features

Another critical requirement of construction payroll is the ability to accurately track costs by project—including materials, overhead, and fully burdened labor spend.  It’s not enough to know what you’re paying employees in total — you need to know exactly where that labor is going. That means allocating time and costs not just to a project, but to specific cost codes within that project, so you can assess the true cost of each component of a project. Without that level of detail, you’re flying blind when it comes to understanding your projected versus actual labor costs.

Generic payroll solutions cannot provide this granular level of detail. They do not come with built-in customizable industry cost codes or trade-specific classifications with corresponding pay-rates that reflect the project type, union requirements, or prevailing wage regulations. Even when contractors develop manual systems that enable basic job costing, these processes are time-consuming, error-prone, and don’t deliver insights until it’s too late to act on them. Your payroll team needs to invest significant time to manually set up these cost codes and classifications and time every payroll period to ensure that hours worked are associated with the correct codes. When you factor in fringe benefits and overhead, the hours only add up. And by the time you’ve closed the books and pulled together job costing reports – typically weeks after a project closes – the opportunity to course-correct has already passed. 

On the other hand, some construction payroll solutions, like Miter, are purpose-built to allocate costs the way construction businesses actually operate. They come with pre-built customizable cost codes to track labor costs by project, phase, task, and location. They can also handle fringe benefits like health insurance, 401k contributions, and per diems as well as overhead expenses so you can track project costs to the last cent. These tools also enable real-time job costing, so you gain live visibility into the financial health of every project and can make timely, informed decisions to stay on budget and protect profitability. Instead of looking back at what went wrong, you can course-correct as the work happens and keep projects on track.

Reason #3: Generic Payroll Solutions Don’t Integrate with Other Construction Tools 

One of the most frustrating aspects of generic payroll solutions is that they often lack integration with other construction management tools. This leaves you with a patchwork of disconnected systems. And when your payroll, accounting, project management, and field teams are all using disparate systems that don’t talk to one another, it creates a cascade of inefficiencies.

With unintegrated solutions, teams spend countless hours on repetitive and mundane tasks, entering the same information multiple times and reconciling discrepancies between systems. Plus, manual data entry increases the likelihood of errors, leading to potential payroll mistakes, inaccurate job costing, and unreliable financial reporting.

Cloud-based, construction-specific payroll solutions address this problem through purposeful integration with accounting and project management software, mobile time tracking, and other business-critical solutions. This tight integration ensures that data flows seamlessly between platforms. Time entered in the field automatically appears in your payroll solution and, once approved, transfers directly to your ERP for job costing. This automation frees up your teams to focus on higher-value tasks while access to real-time data helps them make more informed and strategic decisions.

Reason #4: Generic Payroll Solutions Don’t Prioritize Field-Friendly Time Tracking 

Your workforce is constantly on the move, spread across multiple job sites, so they need a time tracking solution that works for them. It has to be mobile-friendly, intuitive, and easy to use so they can accurately log time from anywhere. And it needs to integrate seamlessly with your payroll platform  to simplify overtime calculations, per diems, tax compliance, and—of course—payroll. 

But despite how closely time worked ties into payroll, most payroll solutions don’t offer built-in time tracking. If your time tracking isn’t fully integrated, it creates extra manual work for your admin team. That burden only grows if you’re still relying on paper time cards. Whether your system is paper-based or just disconnected, your payroll staff ends up chasing down missing information and correcting errors—slowing down payroll and increasing the risk of mistakes. The result? Delayed paychecks for workers, and inaccurate labor cost data for project managers trying to stay on budget.

The best way to manage time tracking and payroll is with a single, unified system. When you connect the field and the back office, you boost efficiency and accuracy across the board. Workers can clock in and out from the field, supervisors can approve hours on the spot, payroll teams get complete time data without the back-and-forth, and project managers gain real-time insights into labor costs and productivity metrics so they can keep projects on track and within budget.

Reason #5: Generic Payroll Solutions Can’t Deliver Construction-Specific Workflows

Generic payroll systems typically follow standard workflows that don't align with construction's project-based approach. For example, in most industries, tracking labor costs might involve simple departmental allocations, but in construction you need granular assignment of hours to specific cost codes, phases, and tasks within each project.

This forces businesses to develop complex workarounds for industry-specific needs such as multi-site work tracking, variable pay rates, and compliance requirements. A generic payroll system simply can't handle a carpenter splitting time across three different projects with unique cost codes and pay rates in a single day.

This disconnect creates inefficient workflows that include manual processes, silos, and flawed data. This can quickly drain your resources and eat away at profits. 

Construction-specific payroll solutions embed industry workflows directly into the system. They can handle cost code allocation, certified reporting, and complex tax calculations automatically. Connected systems keep projects moving while providing the insights you need to control costs and boost profitability across every project.

Making a Move

If your construction business is struggling with generic payroll limitations, it’s time to consider a solution designed specifically for your needs. 

When evaluating a construction payroll solution, it is important to prioritize:

• Cloud-native architecture for anytime, anywhere access
• Comprehensive mobile time tracking for field teams
• Deep integration between payroll, project management, and accounting software
• Built-in compliance tools for construction-specific requirements
• Automated workflows that reduce manual processes
• Customizable reporting that delivers actionable insights

By selecting payroll software that truly understands the unique challenges contractors face, you can benefit from greater efficiency and reduced risk while positioning your business for sustainable growth in an increasingly competitive market.

Miter's all-in-one platform was built for contractors like you. By combining payroll, HR, benefits, and workforce management and integrating seamlessly with your ERP, Miter eliminates double data entry, automates complex compliance requirements, and seamlessly connects field and office teams. Companies using Miter report reducing time spent on payroll by up to 85%, while gaining real-time insights into job costs and ensuring compliance. 

Ready to transform your payroll processes? Request a demo today.